Extended Care Planning “Tackling the 800 Pound Gorilla” John Clarkson Allstate Insurance Agency

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Why Plan for Extended Care?

“There are only four kinds of people in this world… Those who have been caregivers Those who currently are caregivers Those who will be caregivers Those who will need caregivers.” - Rosalynn Carter*, 1997 [Read slide to provide relevance of long term care to everyone.] *Carter, Rosalynn. Speech given as Honorary Chair of Last Acts, National Program of the Robert Woods Johnson Foundation, 13 February 1997.

This is not a discussion about the risk of you needing care, since you may never need it. However, it is essential to have a discussion about the consequences on those you love and promised to take care of, if you ever did need care. Planning is the key. Funding the plan is an option. For most people that means Long Term Care Insurance.

Doesn’t Medicare pay for Long Term Care costs? Research Shows Average National Costs: Nursing home - $6,844 (semi-private), $7,698 (private) per month Assisted living facility - $3,628/month Home health aide services - $20.25/hour 3%+ - average inflation in nursing home costs since 2011 Doesn’t Medicare pay for Long Term Care costs? Let’s take a look at some of the average national costs associated with this type of care: Nursing home - $6,844 (semi-private) - $7,698 (private) per month Assisted living facility - $3,628 per month Home health aide services - $20.25 per hour 3% (+) – average inflation in nursing home costs since 2011 But wait… you may be thinking, doesn’t Medicare pay for long term care costs? Genworth – “Cost of Care” app, 2017

What is Average? We just discussed the average national costs and while the statistics are important, average is just a mid-point in a specific set of data. It is important to remember that some data will fall far below the average and some data will be well above the “average”.

How Would The Extended Care Who Provides Care? How Would The Extended Care Be Paid? What would the affects of these costs have on family members, spouse, children and finances… Who might be providing care… family? How long could they provide care? What is the impact on the care giver? Is this a second marriage? - Have the children discussed providing care? And how would the extended care be paid?

Ways to Pay for LTC Costs Self Fund Risk is in the hands of the owner Timing may be a concern Traditional Long Term Care Ongoing premiums – not guaranteed, no return of premium “Pay as you go” or “Lose it if you don’t use it” Partnership Protection Less Expensive Self fund – risk is in (your or your clients’) hands and timing may be a concern Traditional LTC policies Ongoing premiums are not guaranteed and can increase, there’s also no return of premium – “pay as you go” or “lose it if you don’t use it” Hybrid (asset based) LTC policy (investment) Guaranteed benefits and no additional premium requirements Flexibility and control – live, die, quit Hybrid LTC Policy (Asset Based Investment) Guaranteed benefits, no additional premium requirements Combined protection and control – live, die, quit All guarantees are subject to the claims paying ability of the issuing insurer. Details of product used available upon request.

Loss of future income possibilities Self Fund Tax implications Market timing It’s true, wealthy clients may be able to cover the cost of care, however have they considered these factors? Possible Concern with Timing Tax implications of funding LTC out of pocket may mean using qualified money or income from current investments, which have the potential to significantly increase taxes. Market Timing - Being forced to sell things like stocks, due to the need for cash flow at the wrong time may result in significant loss. Liquidity - Selling property at the wrong market timing can result in significant losses. Loss of Future Income Possibilities - If you’ve sold your future income possibilities, you have a future income loss as well. Liquidity Loss of future income possibilities

Traditional LTC Policy Monthly/daily benefit Benefit duration Inflation protection Shared Care Rider Services - home healthcare, assisted living, nursing home care, adult day care, hospice Potential tax-advantaged LTC premium and benefits Disadvantages: Use it or Lose it Premium not guaranteed Highly Customizable – Flexible Design (You Choose) Highly customizable – flexible design You choose: Monthly/daily benefit – ex. - $150/day or $5,000/month Elimination period (deductible) – ex. 90 days, 180 days Benefit length – ex. 2 to 6 years Inflation protection – ex. 5% compound, 3% compound, no inflation Shared Care Rider – joint pool of month that can be used by either spouse Premiums can be paid annually, semi-annually, quarterly or monthly Covers a variety of services, such as home healthcare, assisted living, nursing home care, adult day care, hospice Possible disadvantages – use it or lose it, premium not guaranteed

Hybrid LTC Policy (Asset Based Investment) LTC policy + death benefit = leverage Premiums payment method (1,3,5,7,10 years) Potential tax-advantaged LTC benefits Tax-free death benefit Enhanced surrender value endorsement Inflation options available Services - home healthcare, assisted living, nursing home care, adult day care, hospice Reallocation of assets Combined (Linked Benefits) – Live, Die, Quit Solution Combined (linked benefits) Solution – use it, die with it or walk away Combination LTC policy with a death benefit Premiums funded with a lump sum or flexible short pay (3, 5, 7 or 10 years) Elimination Period Provides potential tax-advantaged long term care benefits and more leverage for your clients’ (or your) LTC dollars Offers a tax-free death benefit if all or some of the LTC benefits are not used Enhanced surrender value endorsement – guarantees at least your clients’ (or your) original premium amount, should they (or you) want to walk away from the contract Inflation options available Covers a variety of services, such as home healthcare, assisted living, nursing home care, adult day care, hospice Reallocation of assets

Consider This What is your current plan or strategy to pay for the cost of health care in retirement? …What does that plan look like? What would the impact be to you, your spouse/family, business and your retirement income―if you needed help to get through your day? If I gave you a sticky note, what asset would you write on that note that you would use first to pay for the care? I would like to discuss a risk a lot of (clients, like yourself or your clients) may face… What is the your current plan or strategy to pay for the cost of health care in retirement and what does this plan look like? What would the impact be to you, your spouse/family, business and your retirement income – if you needed help to get through your day? If I provided you a sticky note, what asset would you place on that note to use first to pay for the care?

Questions?

Next Steps… (if presenting to clients) Contact your Crump representative and schedule a meeting (if presenting to advisors) Contact your Crump representative to learn more and how to profile clients within your book of business to look for opportunities